Government raises tax on the export of diesel and jet fuel in a fortnightly review

India first imposed windfall profit taxes on July 1, joining a growing number of nations that tax super normal profits of energy companies. But international oil prices have cooled since then, eroding the profit margins of both oil producers and refiners.

The government on Thursday raised the tax on the export of diesel and jet fuel (ATF) and hiked the windfall profit levy on domestically-produced crude oil in line with rising product margins and oil prices. At the fourth fortnightly review, the government raised the windfall profit tax on the export of diesel to Rs 13.5 per liter from Rs 7 per liter.

The tax on Aviation Turbine Fuel (ATF) exports too has been hiked to Rs 9 from Rs 2 per liter with effect from September 1, according to a finance ministry notification issued late Wednesday night. Alongside, the tax on domestically-produced crude oil too has been hiked to Rs 13,300 per tonne from Rs 13,000. The new levies come into effect from Thursday, September 1.

The recovery in oil prices in the second half of August as compared to the first fortnight of the month led to a slight upward revision in windfall taxes on domestic oil production. These are now USD 22.8 per barrel, up from USD 22 previously.

While private refiners Reliance Industries Ltd and Rosneft-based Nayara Energy are the principal exporters of fuels like diesel and ATF, the windfall levy on domestic crude targets producers like state-owned Oil and Natural Gas Corporation (ONGC) and Vedanta Ltd.

India first imposed windfall profit taxes on July 1, joining a growing number of nations that tax super normal profits of energy companies. But international oil prices have cooled since then, eroding the profit margins of both oil producers and refiners.

Rates have declined since and Brent, the world’s best-known benchmark for crude oil, was trading at USD 93.28 per barrel on Thursday, down 2.47 percent over the previous close. If the declining trend continues, the levy on domestically- produced crude oil is likely to be cut at the next revision due in mid-September.